Crude oil price spike worrying but it’s been higher in the past

by Shahkar Abidi 17 Sep 2019

With global crude prices spiking to $71.95 , up by 19.5 percent on Monday morning due to geopolitical tensions after drone attacks on Saudi Arabia's refineries on Saturday by Houthi rebels, oil companies and industry experts are expecting tougher days ahead for retail consumers in India as well for the country's foreign exchange, which has already been under pressure in recent months.

This has been the biggest jump in crude oil prices, since Saddam Hussein's invasion of Kuwait in 1991. However, yesterday’s price surge is not an isolated one as several such geopolitical events, beginning 1970s, have kept taking oil prices to new highs. Here is a list compiled by ICICI Securities of global events affecting global crude oil prices.

Arab embargo (October 1973): During the 1973 Arab-Israeli War, Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an embargo against the United States in retaliation for the U.S. decision to re-supply the Israeli military and to gain leverage in the post-war peace negotiations. Arab OPEC members also extended the embargo to other countries that supported Israel including the Netherlands, Portugal, and South Africa. The embargo both banned petroleum exports to the targeted nations and introduced cuts in oil production. 
Duration: 4 weeks, price change: 231.6 percent, supply loss: 3.3 percent.

Saudi Arabia’s refusal to increase output (January 1979): With oil supply declining during the Iran-Iraq war in January 1979, Saudi Arabia decreased its production by 2 million barrels per day on January 20. Saudi Arabia’s output vacillated for next several months, though well below its then actual capacity. 
Duration; 2 weeks, price change: 64.5 percent, supply loss: 2.5 percent.

Outbreak of Iran-Iraq war (September 1980): The Iran-Iraq war happened when Iraq invaded Iran and lasted for eight years, ending in a UN-brokered ceasefire. 
Duration: 2 weeks, price change: 28.4 percent, supply loss: 1.5 percent.

Iraq invasion of Kuwait (August 1990): The invasion by Iraq of neighbouring  Kuwait led to the first Gulf war. The Iraqi army burnt hundreds of oil wells before being forced out from the territory by UN-backed forces. 
Duration: 6 weeks, price change: 58.4 percent, supply loss: 0.5 percent.

OPEC unilateral production cut (January 1999): OPEC member countries agreed to introduce stringent export limits to end the year-long glut and thereby increase its prices from the record low level. 
Duration: 6 weeks, price change: 45.2 percent, supply loss:1.3 percent.

Venezuela oil strike (November 2002): The Venezuela oil strike was orchestrated by the opposition political parties against President Hugo Chavez. The strike had a damaging impact on the Venezuelan oil industry, which was the major source of revenue for the government. 
Duration: 2 weeks, price change: 117.5 percent, supply loss: 5.1 percent.

Surge in Chinese distillate demand (late 2007): By late 2007, the tremendous demand generated from the booming Chinese economy and lesser availability made prices surge, forcing  oil producers to increase their productions. 
Duration: 6 weeks, price change: 31.1 percent, supply loss: 0.7 percent.

EU enforcement of 10-ppm sulphur diesel (September 2008) : Faced with the growing pollution level, European nation decided to enforcement environmentally safer automotive fuel by regulating the reduction of sulphur content in it. 
Duration: 6 weeks, price change: 45.2 percent, supply loss: 1.3 percent.

Collapse of Libyan production (January 2011): The Libyan crisis, which began in 2011, led to civil war and the outing of Muammar Gaddafi. The crisis resulted in crippling of the country’s dominant oil industry. 
Duration: 3 weeks, price change: 27.7 percent, supply loss: 0.7 percent.